Kioxia takeout gets cool response
- Loans: Toshiba spin-off struggles to attract lenders despite relatively rich pricing
By Wakako Sato
TOKYO, Jan 17 (LPC) - Kioxia Holdings, the new owner of Toshiba’s memory chip unit, drew a cool response to the first round of syndication of its ¥1.028trn (US$9.35bn) takeout financing, as doubts around the semiconductor industry dampened the appeal of a high margin by Japanese standards.
Six domestic banks joined the deal, committing around ¥238bn combined, leaving mandated lead arrangers and bookrunners Mizuho Bank, MUFG and Sumitomo Mitsui Banking Corp holding more than three-quarters of the debt.
The lukewarm response to the first phase of syndication, however, shows that Japan’s domestic banks remain extremely selective in their search for higher returns.
Kioxia’s five-year deal offers an interest margin of about 240bp over Tibor in a market where plain-vanilla corporate loans typically pay less than 100bp at the same maturity.
Other recent leveraged buyout loans have paid under 200bp, including Calsonic Kansei’s ¥1trn seven-year loan backing its LBO of Italian high-tech car parts maker Magneti Marelli last year.
Japanese conglomerate Toshiba sold its memory chip unit in 2018 to raise money, but retains 40.2% of the voting rights. The new owners, led by US private equity firm Bain Capital, included long-time customers Apple, Dell Technologies and Seagate Technology.
The ¥2trn acquisition of Toshiba Memory Corp in 2018 was Asia’s largest leveraged buyout. A ¥600bn loan in June 2018 from a bank group led by Mizuho and SMBC helped fund the acquisition.
Kioxia’s ¥1.028trn borrowing refinances the original LBO financing and follows other large deals that drove up syndicated loan volumes in Japan to US$237.54bn in 2019, a six-year high, according to Refinitiv LPC.
In September, Takeda Pharmaceutical raised a ¥700bn loan to refinance a US$30.85bn bridge financing that backed the £46bn (US$62bn) acquisition of London-listed rare-disease specialist Shire. The bridge, completed in June 2018, remains Asia’s largest syndicated loan.
In January last year, Renesas Electronics completed a ¥897bn financing to take out a bridge loan backing its US$6.7bn acquisition of US chip-design firm Integrated Device Technology.
M&A activity in Japan in 2019 skyrocketed 40% year on year to US$130.7bn and to a 21-year high, according to Refinitiv data.
Market participants expect event-driven financing activity to remain strong as Japan Inc continues its overseas shopping spree and conglomerates carve out non-core assets in search of growth in a stagnant domestic economy.
One big-ticket financing on the cards is for electronics maker Showa Denko, which plans to borrow up to ¥695bn in late 2019 for its proposed acquisition of Hitachi Chemical. Mizuho is providing two loans – a ¥295bn facility for Showa Denko and an additional ¥400bn financing for its special purpose company, HC Holdings – that could be launched into wider syndication this year. ( Reporting By Wakako Sato; editing by Prakash Chakravarti and Steve Garton)